It is good to see that the Government is pressing forward with the policy of stripping out costs to members of pension schemes that they have not sought and do not need. A recent step is DWP’s current consultation on banning member-borne commission in most occupational pension schemes.
On the face of it, this raises implementation issues rather than floating substantive changes in policy. The coalition Government had already confirmed the intention to ban such commission payments to advisers in qualifying schemes used for automatic enrolment. The FCA has introduced rules to achieve this in relation to personal pension schemes, and the position in relation to occupational schemes is now being covered.
Perhaps the major question now raised is whether the principal responsibility for ensuring that involuntary commissions are not charged to members should be laid on service providers or on trustee bodies. This raises a wider issue for us trustees.
On the one hand, trustees would no doubt be glad enough to be without a further regulatory burden – though the proposed option that would absolve them of direct responsibility would still require them to gather new information on the Pensions Regulator’s behalf. Yet, on the other hand, one wonders whether it is helpful for the authority of trustees or for the reputation of the trust model to absolve trustees of schemes from responsibility for what is done to the members of those schemes.
It is one thing to forgive them for having in good faith got themselves into situations in the past where intermediaries, often without the trustees’ knowledge, made money from members in ways that were then commonplace but now seem inappropriate. It is quite another that we trustees be allowed to label any survival of these practices as someone else’s problem. What is the point of occupational pension scheme trustees if they are not required to have oversight of the service providers they retain?
In the case in point it might well be that scheme members could still reproach trustees, or even sue them, for simply leaving the implementation of the removal of these commission structures to the Pensions Regulator and to the service providers. To that extent, the imposition of an express regulatory duty on trustees would have the welcome effect of strengthening them in their task of negotiating away something that it is their duty to get rid of, but might otherwise be unnecessary.
The message of not imposing the proposed statutory requirement on them, however, is one that it is extremely undesirable to propagate. It is one that is cropping up in a variety of places, promoted by those who should know better, that trustees – especially lay trustees - are peripheral to the protection of members’ interests, and that the people who embody the character of occupational pension schemes as social, as well as financial institutions, should step aside to let those who have a living to make out of members get on with it, with only the public authorities to keep them honest.
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